While there is optimism surrounding the drone launch by GoPro Inc (NASDAQ: GPRO), softness in the camera segment could be a downer. Pacific Crest’s Brad Erickson maintained a Sector Weight rating for the company, saying U.S. checks indicated GoPro’s days of inventory could be again reaching a record high.

Channel Inventory High

Checks indicated days of inventory at “roughly three weeks consistently over the past month,” Erickson said, adding that aggregate sell-through in the US is estimated to be down nearly 40 percent year-over-year in Q1.

The current sell-through run-rates are expected to be ranging between 800,000 and 1 million units per quarter, versus the Street expectations of ~1.1 million in Q2 and ~1.2 million to 1.3 million in Q3.

Camera Softness

Erickson commented that new software and acquisitions were unlikely to improve GoPro's “core utility problem.” He added, “While GoPro cameras remain a compelling device for a small niche of buyers, we believe the editing experience remains the key roadblock in attracting incremental users to the category.”

Drone Launch

GoPro is expected to launch its Karma drone towards the end of 2Q. The analyst estimated that 5-6 million consumer, camera-enabled drones could be shipped globally in 2016. He wrote, “We believe the stock has gotten some recent lift anticipating Karma, which could persist depending on how it is initially perceived by investors.”

The EPS estimates for FY16 and FY17 have been reduced from $(0.56) to $(0.77) and from $(0.77) to $(0.93), respectively. Although the drone launch doubles GoPro’s TAM and may lend support to shares in the near term, there is downside risk in the longer term on account of action camera softness, with drones expected to gain only modest traction over time.